Zika fever is starting to take a toll on exporters to China. U.S. agriculture shippers say they are starting to see added costs since China added the U.S. to a list of Zika-infected countries early this month, and the WSJ’s Costas Paris reports they’re worried about bigger problems in supply chains as enforcement policies are rolled out. Exporters who ship everything from agricultural products and chemicals to engine parts say they fear that conflicting information from Chinese custom officials about the new requirements could result in delays, added cost and lost business. Some exporters in Brazil, which has been coping with the new rules for several months, say they have already dealt with significant backups and damaged goods from fumigation. They say the procedures, including documentation on fumigating, depend on the local customs officers. U.S. exporters are scrambling to figure it out since the fall for many of them is the most important shipping season of the year.

One of the world’s biggest retail-industry middlemen is being squeezed by the sweeping changes in the consumer-sales business.
Li & Fung Ltd.
, which contracts with 15,000 factories globally to make apparel, toys and other goods for retailers, saw its profit plummet more than 50% in the first half of the year on a 6.4% drop in sales, the WSJ’s Kathy Chu reports, and now faces big questions over the fundamentals of its business model. As consumers increasingly shop online for the best deals, retailers are pushing lower prices, putting pressure on factories and intermediaries alike. The big brands also are ordering less as shoppers move to online marketplaces, leaving sourcing agents with slimmer pipelines. Li & Fung is trying to adapt by expanding its service offerings, including greater use of the company’s own logistics and distribution operations. Just like its retail customers, however, the middleman needs more goods moving through its supply chain and to consumers to make the business more profitable.

Global pharmaceutical giant
Merck
KGaA wants a bigger role in supply chains. The German company is branching out beyond health care, bucking bigger trends in the drug-making business by expanding while others are streamlining and pushing to manufacture goods even as many companies shift their focus to services. Chief Executive
Stefan Oschmann
tells the WSJ’s Christopher Alessi that last year’s $17 billion acquisition of U.S.-based laboratory-equipment maker Sigma-Aldrich Corp. was a signature move both because it brought Merck into a new market and because the business came with advanced “e-commerce and digital business models.” The company, he says, “did a superb job on supply chain and distribution.” Merck is also pushing a business that produces specialty chemicals such as the liquid crystals used in display screens. The company isn’t turning its back on drug-making, but in diversifying Merck is hedging its bets and may find that business away from pharmaceuticals is a healthier place to be.

SUPPLY CHAIN STRATEGIES

Welspun India Ltd.
is overhauling its supply chain as the textile supplier tries to maintain its customer base. The company, one of India’s biggest providers of manufactured textile goods, is trying to contain a controversy that began when
Target Corp.
dropped Welspun after concluding it delivered fake Egyptian-cotton sheets, the WSJ’s Preetika Rana reports. The dispute, which has drawn in several of Welspun’s other U.S. customers, exposes the complexities of a global supply chain in which each stage of production can happen in different continents. Monitoring far-flung sourcing has grown increasingly important as companies have focused on sustainability and ethical issues in supply chains. But the Welspun controversy turns on more fundamental business issues, including the quality behind goods and the basics of contractual relationships. With other retailers raising questions, Welspun now is concerned with maintaining its business while an audit of its supply chain is completed.

QUOTABLE

‘Oregon doesn’t have the Zika problem, but we still have to fumigate and it’s a significant expense.’

—Scott Harer, Columbia Seeds LLC.

Number of the Day

$684 billion

Forecast e-commerce sales in the U.S. by 2020, according to eMarketer.